Home Money Inheritance tax revenue rises by £400m in six months as more people get ‘caught in the net’

Inheritance tax revenue rises by £400m in six months as more people get ‘caught in the net’

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Tax raid: Chancellor Rachel Reeves tipped to make changes to inheritance tax rules in autumn budget

Inheritance tax revenue added an extra £400m to the government’s coffers between April and September, compared with the same period last year, new data shows.

Inheritance tax collections reached £4.3bn in the six months between April and September, new HMRC data shows, continuing the upward trend in IHT collections that has persisted since 2009.

In the last full financial year, inheritance tax raised £7.5 billion, an increase of more than £400 million on the previous year, which in turn caused inheritance tax collection to inheritance will increase by almost a billion pounds.

Tax raid: Chancellor Rachel Reeves tipped to make changes to inheritance tax rules in autumn budget

Alastair Black, head of savings policy at Abrdn, said: ‘As asset values ​​continue to rise and thresholds remain frozen, more and more people are becoming caught in the inheritance tax web.

“Families will be closely monitoring the upcoming autumn budget for any changes to inheritance tax as rumors abound that the Chancellor will look to increase inheritance tax to help reach the £40bn now target informed”.

Currently, around one in 20 households are required to pay the tax, but this could increase in the budget.

Although it’s often considered a tax on the rich, “that’s just not the case anymore,” said David Denton, a technical consultant at Quilter Cheviot.

Inheritance tax applies at 40 percent on inheritances above a certain size.

It must be worth £325,000 if you are single, or £650,000 jointly if you are married or in a civil partnership, for your loved ones to have to pay inheritance tax.

An additional subsidy, the nil residence rate band, increases the threshold by £175,000 each – i.e. £350,000 for a married couple – for those leaving their home to direct descendants. This creates a potential maximum joint inheritance tax-free total of £1 million.

This home ownership allowance begins to be phased out once wealth reaches £2 million, at a rate of £1 for every £2 above the threshold. It disappears completely at £2.3m.

David Denton adds: ‘The first Labor budget is just over a week away and rumors have been rife about possible changes to inheritance tax.

‘Inheritance tax is a very emotive issue and has been ripe for reform and simplification for many years, as it is full of impenetrable and irrelevant details that need review.

“However, reports that the Government could make a swift tax haul by scrapping the complex but valuable nil residency rate band, or extending the current seven-year rule to ten years, could face a significant backlash.”

According to rumors, Chancellor Rachel Reeves could combine the two thresholds but reduce the total amount you can leave to your loved ones.

Another possibility is that pensions are grouped with assets that count for inheritance tax.

Other potential changes could mean the closing of several tax loopholes, and farm and business relief could be threatened; a move that could see farmers and small business owners suffer and see AIM crippled despite the Government’s promise to boost investment in the UK.

“No one knows what changes will be announced, but most agree there will be some attempt to get more income from properties,” said Nicholas Hyett, investment manager at Wealth Club.

‘All governments need to balance short- and long-term priorities. Throwing the kitchen sink at inheritance tax may be a good short-term policy, but it risks causing long-term damage.’

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